MercadoLibre is cheaper today than it has ever been, even though it doesn’t look that way on paper.
MercadoLibre $MELI just reported Q2 2026 and honestly – these are exactly the kind of results I want to see from a company I own for the long term.
Anyone looking only at profitability will probably see a problem.
Operating margin fell from 12.2% to 6.7%.
Operating income fell by 17%.
Net income fell 11% to $466 million.
EPS (Earnings Per Share) dropped from $10.31 to $9.19.
The stock is dropping after the results.
And the trailing P/E (Price-to-Earnings) is still somewhere in the high 40s.
So on paper, MELI certainly doesn’t look like a cheap stock.
But then I start to look at what’s really happening inside the business.
And I see a completely different story.
50% revenue growth. At a company of this size.
Net revenue + financial income reached $10.17 billion.
Year-over-year:
+50%.
That’s the fastest growth in the last four years, and it’s now more than 30 consecutive quarters of MercadoLibre growing more than 30% YoY (Year over Year).
30+ quarters.
More than 7.5 years.
And instead of slowing down, they just accelerated to 50%.
Commerce revenue +50%.
Fintech revenue +49%.
GMV (Gross Merchandise Volume) reached approximately $22 billion, up 44% in dollars.
TPV (Total Payment Volume) crossed $100 billion for the first time, up 56%.
795 million items sold, +45%.
89 million active buyers, +26%.
Items per buyer, +14%.
Advertising revenue +73%.
Mercado Pago MAU (Monthly Active Users) +30% to 88 million.
AUM (Assets Under Management) +68% to $23 billion.
This is not a business whose economics are falling apart.
This is a business growing like crazy.
So why is the margin falling?
Because MercadoLibre is investing.
Aggressively.
Free shipping.
Logistics.
Credit cards.
Mercado Pago.
MELI+.
Cross-border commerce.
1P (First Party).
Advertising.
AI (Artificial Intelligence).
And this is where I think a lot of investors look at MELI completely differently than I do.
Right now, I don’t want this kind of business to maximize EPS over the next 12 months.
If management can put another dollar back into the company with a high return and thereby widen its moat, I want them to do it.
Management even openly says that operating leverage exists, but they are consciously reinvesting the resulting savings back into further growth.
And we are already starting to see the results of these investments.
The most important number in the report, in my opinion, is not +50% revenue.
It’s:
Ecosystemic users +37%.
That means customers who use both Mercado Libre and Mercado Pago.
And this is extremely important for the entire investment thesis.
Such a customer generates approximately:
+70% higher GMV per user compared to a marketplace-only user.
Nearly +90% higher TPV per user compared to a fintech-only user.
And management calls them their most valuable segment.
This, in my view, is MercadoLibre’s real moat.
Marketplace → logistics → Mercado Pago → credit card → MELI+ → Ads → more data → better credit risk assessment → higher engagement → more purchases.
And then start all over again.
Each additional service makes the other parts of the ecosystem more valuable.
A competitor can’t just build a better e-shop.
They would also have to compete with MercadoLibre’s logistics, Mercado Pago, credit, cards, advertising, loyalty program, and a massive user base.
The moat doesn’t widen linearly.
The individual parts reinforce each other.
Brazil beautifully shows why I’m willing to accept a lower margin.
A year ago, MercadoLibre aggressively lowered the free shipping threshold.
Short term?
Higher costs and a lower margin.
Long term?
FX-neutral GMV in Brazil +39%.
Number of items sold +56%.
Customers are buying more often, across more categories, and new cohorts show higher retention – meaning a larger share of new customers stay and keep using MELI.
This is exactly the return on investment I want to see.
The company is buying a change in customer behavior with a short-term margin hit.
And if that customer stays in the ecosystem for another 5, 10 or 15 years, their lifetime value may end up being completely different from the shipping costs MELI bears today.
And then there’s Mercado Pago.
It’s long ceased to be just an add-on to the marketplace.
TPV $101 billion.
88 million MAU.
$23 billion AUM.
Credit portfolio over $16 billion, +75%.
Credit card portfolio $7.7 billion, +91%.
In a single quarter they issued 2.6 million new credit cards.
And this is both the biggest risk and one of the biggest opportunities for MELI.
A new credit card customer is not maximally profitable today.
Quite the opposite.
Credit card NIMAL is currently -2.5%.
NIMAL (Net Interest Margin After Losses) simply shows how much MELI earns from the credit portfolio after deducting funding costs and provisions for bad loans, relative to the size of the credit portfolio.
For new cards this value is currently negative because MELI is adding new customers extremely quickly. New cohorts initially have higher customer acquisition costs and higher provisions for potential credit losses.
However, management shows that older cohorts improve as they mature and expects the same development for today’s cohorts.
Overall NIMAL has already improved sequentially by 3 percentage points to 20.7%.
And even more interestingly:
Credit card holders are 2–3× more likely to remain ecosystemic users, according to MELI.
So the card isn’t just a product on which they want to earn interest.
It’s a tool to tie the customer to the entire ecosystem.
Of course – credit risk should not be ignored.
I don’t want to wear rose-tinted glasses here.
A credit book growing 75% annually is an enormous number.
At this pace of growth, I want to monitor the quality of new cohorts, NPL and NIMAL very closely.
NPL (Non-Performing Loans) is one of the metrics showing us the quality of the credit portfolio.
Right now, the portfolio quality looks good.
15–90 day NPL, i.e. loans 15 to 90 days past due:
Entire portfolio: 7.0%.
Credit cards: 4.6%.
Both values are near historical lows, according to the company.
But this is exactly the metric where my thesis could change.
If credit continues to grow at 50–70%, but NPL starts to surge and mature cohorts don’t become more profitable, we have a problem.
But I’m not seeing that yet.
I see aggressive growth with still very good asset quality.
And cash flow?
It’s worth looking beneath the surface here as well.
Adjusted FCF (Adjusted Free Cash Flow) was only $214 million in Q2.
Not amazing at first glance.
But during the quarter, MELI also invested:
$441 million in CapEx (Capital Expenditures, e.g. on logistics, technology and infrastructure)
and approximately
$2.1 billion in expanding the credit portfolio.
So the company really isn’t leaving much capital sitting around right now.
It’s reinvesting it.
And that’s exactly what I want from it at this stage.
Amazon 2.0?
I’m not claiming MercadoLibre will be the next Amazon.
That would be too simplistic.
But its approach to capital strongly reminds me of Amazon.
Amazon could have started maximizing its profitability much earlier.
Instead, it built fulfillment, Prime, logistics, AWS, and other layers of its ecosystem.
An investor looking only at the P/E at the time often saw an expensive company.
An investor looking at what was being built from those reinvestments saw something completely different.
And that’s exactly how I look at MELI today.
If MercadoLibre were growing 5–10% and its operating margin were falling from 12.2% to 6.7%, I’d be very nervous.
But MELI just accelerated revenue growth to 50%.
GMV +44%.
TPV +56%.
Items sold +45%.
Ads +73%.
Ecosystemic users +37%.
That’s a completely different story.
And now we come to the valuation.
This, in my opinion, might be the most interesting part of the whole story.
MELI still doesn’t look cheap on a P/E basis.
The trailing earnings multiple is roughly in the high 40s.
But what are we actually measuring?
Earnings in a period when management is deliberately reinvesting operating leverage into free shipping, logistics, cards, customers, and further growth.
That’s why I also look at the valuation relative to revenue.
And something fascinating is happening there.
After Q2 and the current drop, MELI is trading at roughly 2.6× trailing P/S (Price-to-Sales).
In other words, the market is paying about $2.6 of market value for every dollar of MELI’s annual revenue today.
Historically, that’s an extremely low level.
And right now the company accelerated revenue growth to 50%.
Of course, P/S alone never determines fair value, and today’s mix at MercadoLibre is different than ten years ago.
But the paradox is beautiful:
The price the market pays for a dollar of MELI’s revenue is at a historically exceptionally low level, precisely at the moment when the company is growing the fastest in the last four years.
And that’s why I say MELI may in a certain sense be the cheapest it has ever been, even if it doesn’t look that way when you look at the classic P/E.
So what do I watch with MELI?
Not whether the operating margin will be 6.7% or 7.5% next quarter.
I watch whether:
the customer base is growing,
GMV is growing,
TPV is growing,
the number of ecosystemic users is growing,
the free shipping investments are working,
maturing credit cohorts are improving their economics,
NPL stays under control,
Ads continues to grow,
and above all whether every additional dollar reinvested in the business makes the entire ecosystem stronger.
If yes, let management invest.
Today, I don’t want maximum EPS from MELI.
I want maximum value for MercadoLibre 10 years from now.
And if a time comes when they decide to tighten their belts a little, slow the pace of investments, and let the operating leverage flow through the income statement, we may find out just how much earnings power this business really has on a much larger revenue base.
Until then?
30+ quarters of growth above 30%.
Currently +50% revenue.
A moat that gets wider with every passing quarter.
For me, one of the most beautiful compounders on the market.
Take my money. 😅🔥
This is not investment advice. I own MELI and this is my view on the company and its results.
